My take on central bank digital currencies have always been negative. They never seemed to be a replacement for cryptocurrencies and were more a replacement or addition to fiat. And my idea on the same is also shared by the deputy governor of the Bank of Ghana. He says that CBDCs is fiat money, and the testing phase of the same will start soon. And based on the testing phase, the decision of whether or not CBDCs will be used shall be taken.
Why are banks working on CBDCs?
I believe that most banks are working on CBDCs to show that they are staying with the crowd. In other words, they are embracing technology and are working on it to produce financial products. Even in the case of the Bank of Ghana, their idea behind working on CBDC was to embrace new financial technology. And they will even start the test pilot pretty soon. Some banks also have the idea that if they release a Central bank digital currency, it will be able to release currencies like Bitcoin and Ethereum.
The problem with CBDCs
While many banks and individuals believe that Central bank digital currencies can replace Bitcoin and other cryptocurrencies, I don’t think they can. 1st of all, being fiat money, the idea of decentralization goes down the drain with CBDCs. The main reason why people love Bitcoin is that it is not controlled by any central authority. But in the case of CBDCs, that will not be the case.
In fact, owning them will be similar to having cash as I am pretty sure that they will also be inflationary. As the government will release tokens based on their need in the market. But this time around, there will be no printing costs or time required, which might make it even more frequent. This totally makes the entire idea behind owning cryptocurrencies useless. Because in today’s time, anyone looking to buy crypto is doing so in order to preserve the value of their money and even make good returns over a long period of time.
What are your thoughts on the deputy governor of the Bank of Ghana calling CBDCs fiat money? And do you think they will be able to replace cryptocurrencies? Let us know in the comments below. Also, if you found our content informative, do like and share it with your friends.